Royalty payouts by Hyundai Motor India Limited (HMIL) to its parent company in South Korea reached near historic highs in FY23 on the back of best-ever sales reported by the carmaker. The manufacturer of models such as the Creta, Venue, Verna , i20, Exter, Alcazar, etc., has been paying around 3.5 percent of sales to Hyundai Motor Corporation (HMC).
As per the Draft Red Herring Prospectus (DRHP) reviewed by Moneycontrol, HMIL’s royalty outgo to HMC during financial Year ended March 31, 2023 was Rs 14,358.19 crore, nearly 30 percent higher compared to Rs 10,973.36 crore paid during FY22. During the April-December period of FY24, the country's second largest carmaker paid Rs 8,088.80 crore to parent company based in Seoul, as per the DRHP.
Last fiscal, HMIL launched many new models as well as product upgrades including Exter, new Creta, Creta N Line, new i20 and introduction of ADAS in Hyundai Venue and Venue N Line.
Under the existing “Royalty Agreement” dated June 10, 2024 with HMC, the South Korean carmaker has granted HMIL a non-exclusive, non-transferable right and license to manufacture and sell passenger vehicles and/or parts. Hyundai India can also use HMC’s trademarks in connection with such manufacturing and selling activities for which the Indian subsidiary is required to pay an amount to HMC equal to 3.5 percent of its sales revenue, as per DRHP.
Hyundai India has registered its highest-ever total sales of 7,77,876 units in FY24 with a Year-on-Year (YoY) growth of 8 percent as compared with 7,20,565 units in FY 2022-23. The carmaker also reported its highest-ever domestic sales since inception, registering 6,14,721 units in FY24, with a YoY growth of 8.3 per cent over FY 2022-23 (5,67,546 units)
“Pursuant to the Royalty Agreement, we require HMC’s prior written consent to engage in export sales, directly or indirectly (which is to be determined as set forth in the Royalty Agreement), arising from sale of the passenger vehicles or parts,” the DRHP mentioned. “Before the current Royalty Agreement was entered into, HMIL paid a separate royalty fee for each passenger vehicle model sold, it added.
However, it also mentioned, "Pursuant to the Royalty Agreement, we require HMC’s prior written consent to engage in export sales, directly or indirectly. Further, the Royalty Agreement may be terminated upon the occurrence of certain events, such as deterioration of quality of products or our inability to make the royalty payments to HMC. Any such termination could prevent us from being able to manufacture and sell passenger vehicles under this arrangement, which in turn will adversely impact our business and operations.”
A Hyundai India spokesperson declined to comment on the company’s royalty payouts to parent firm.
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